Sea Escape's recent filing of Chapter 11 bankruptcy protection/reorganization is the culmination of a number of incidents in the one-day market over the past year which indicates there are may be more problems brewing.
Lack of Cash Flow
According to Douglas MacGarvey, President of Sea Escape, the cruise line "could not meet current obligations and needs time to re-organize." In 1990, cash revenues fell 20 percent behind 1989 revenues. He felt that reorgaruzation was possible, however, since "assets exceed liabilities."
Sea Escape owns six cruise ships, three of which sail under the Sea Escape name; two are under charter; and one was being converted (this project is temporarily put hold). MacGarvey did not commit to whether the line would lease or sell one of its vessels, as he said the company is "looking at all alternatives."
MacGarvey said that 1990 was "extremely difficult" for a number of reasons including the recession; increased fuel costs; and the decline in travel to Florida due to the Middle East war, particularly by Europeans. Additionally, MacGarvey pointed out that last year's conversion of the Scandinavian Dawn cost SeaEscape a lot more money than anticipated since the shipyard went bankrupt during the conversion which added to the final cost. The ship's subsequent delay also cost the company since SeaEscape had to re-direct its promotional efforts every time there was a delay in delivery date.
Sea Escape is not the first of the present one-day operators to file for bankruptcy. Although Pride Cruise Lines, Ltd. filed for Chapter 11 in Mississippi and subsequently repositioned the 800-passenger Pride of Galveston (formerly the Pride of Mississippi) from Gulfport to Galveston, the line has presently paid off all its debts. According to a spokesperson for Pride, the line carried approximately 193,000 passengers (counted once) in 1990 and spent $19.5 million in operations costs last year. While Pride generated $1.4 million in revenues for the Port of Galveston, the economic ripple effort the line had on the Galveston area was estimated at $50 to $60 million.
The Pride of Galveston has not been sailing since early January since she was undergoing a $4 million refurbishment. She is due to sail again on March 29 boasting a second casino and interior improvements.
According to a company spokesperson, the company is presently lobbying Texas legislature to change laws requiring cruise ships to wait until they are 12 miles offshore before opening casinos. Pride's lobbyist is trying to get the law changed so that the ship can open its casino after it is three miles out which is currently permitted in other states. If the law is passed, Pride would double the number of sailings from eight to 14 a week during summer months.
Last year, both Pride and Europa battled head-on in Galveston. While Pride operated out of the Port of Galveston, the 600-passenger Europa Jet sailed from a Galveston park port facility. Europa was hit with a number of unfortunate incidents, including being dragged into a lawsuit that Pride filed against the City for reneging on Pride's exclusivity agreement. In addition, 60 percent of Europa's sailings were cancelled during start-up operations in late 1989 and early 1990 due to fog. Then last June, the Europa Jet experienced mechanical problems which kept her out of commission for half the summer. Subsequently, in September Europa leased the Jet to another day-cruise operator, Southern Elegance.
According to Europa Chairman Charles Liberis, the company "lost a fortune" when the ship was not sailing last summer and therefore Europa leased the vessel as a "breather."
Europa also has a "mutual reciprocal expansion agreement" with Casinos Austria. Casino Austria invested $500,000 in convertible debentures in Europa and subsequently took control over Europa's casino operations. Liberis said that both companies are looking to explore other "opportunities" on an international scale, but plans were slowed down due to the war.
Liberis said that the company has returned back to profitability. February was the first time in the past year that Europa has hit the break-even point, according to Libens. He added that this past month should be the first month that the company will see a profit since late 1989. Liberis attributed the up-turn to a "back to basics" marketing approach whereby Europa has increased its sales force rather than its advertising budget. While 50 percent of the company's 1989 sales were from groups, this number declined to 28 percent last year; therefore, there has been more emphasis on groups in 1991.
Weathering the storm
Discovery Cruises seems to be weathering the rough seas best in the one-day market. Although Discovery did see a slow-down during the outbreak of the Middle East war, Vice President of Sales and Marketing, Chuck Summers said that the line has seen a good rebound since.
Discovery, which operates the 1,250-Discovery I out of Port Everglades, has been devoting much of its marketing energies to out-of-state regions including Chicago, New York, Philadelphia, Atlanta, and Canada. Last year the line introduced a "vacation your way" package which includes air, hotel in Fort Lauderdale or Miami, a rental car, the cruise to Freeport, and hotel stays of three to seven days. Summers added that the line is enjoying strong international marketing returns, particularly with Europeans and South Americans, through Discovery's presence at many international travel trade shows. Another facet of Discovery's marketing scheme includes co-operative advertising with the Bahamas.
In addition to a tri-level casino, the Discovery I boasts a continental restaurant which has been called "one of the best in Fort Lauderdale" and is a member of the Chaine des Rotisseurs.
According to a company spokesperson, the line "does have expansion plans" and is carefully looking for another ship to add to its fleet.
Crown Cruise Line, which operates the 700-passenger Viking Princess, out of the Port of Palm Beach, said that its 1991 one-day program was "doing just fine."
"We carried 126,028 passenger last year and the trend is similar this year," said Linda Michel, Senior Vice President of Marketing and Sales. She said that Crown pulled most of its one-day passengers from the local market including Canadian and Scandinavian tourists, and had not seen any decline in business. She added, however, that the company has become more aggressive, countering the competition from the one-day operators in Ft. Lauderdale and Miami with its own sales representatives pulling groups "only two blocks from the Port of Miami."
Southern Elegance, which has been operating for six years, moved to Gulfport from Port Manatee and Panama City, Florida last year so that it would have a year-round market rather than repositioning the ship seasonally as it did in between Port Manatee and Panama City. Pat Harmer, Marketing Director, said that the line is enjoying a strong winter golf market from northern visitors and therefore the company's marketing efforts have been focused in a vertical line north from Mississippi, including Memphis, Montgomery, St. Louis, and Chicago.
On the west coast is upstart Starlite Cruises which operates the 1,000-passenger Pacific Star out of San Diego. The line, which started operations in late 1990, is presently working on pre-marketing arrangements for a future vessel possibly in the three and four-day market.
"Our goal has always been to be a full-service cruise line," said a spokesperson for the line. "This gives us more incentive to provide a top-notch cruise experience on our one-day cruises so that passengers will want to cruise longer with us in the future," he continued. Plans are still slated to launch the 600-passenger Empress sometime this summer, although itineraries need to be finalized. The spokesperson said that the decision had not yet been made as to whether the ship would sail three and four-day cruises or seven. He noted that there is increased competition due to the soon-to-be refurbished Viking Serenade along with rumors that Premier Cruises may launch a ship on the west coast.
While Starlite is concerned about repeat passengers, some of the one-day lines may not possess the necessary long-term vision according to Louis Perez, Director of Cruise Marketing and Trade Development for Canaveral Port Authority. He feels that the one-day lines may not be investing enough in service and simple amenities such as good air-conditioning in order to attract passengers back.
According to Liberis, part of the reason for the instability in the one-day market is over-capacity. This, coupled with the fall off of discretionary income this year, have made the past few months difficult.
Also, the one-day market is more price sensitive to changes in laws such as increases in port or passenger taxes. The one-day lines are also closely watching Congress' move toward voting on minimum wage laws for foreign crews. The price increases due to increased passenger taxes and other laws are more easily absorbed into the longer cruises than the one-day cruises.